VANCOUVER — American Hotel Income Properties (AHIP) REIT has reached an agreement to sell its 45-hotel economy-lodging portfolio to an affiliate of VCM, Ltd. for $215.5 million.
Trading at a cap rate of 8.2 per cent, the sale follows AHIP’s review of the portfolio, which concluded its long-term strategy was better served by expanding its premium-branded hotel portfolio.
“Following the sale of our economy-lodging properties, AHIP will be better aligned with our U.S. hotel REIT peers by owning a focused portfolio of purely mid-to-upscale, select-service branded hotels,” says John O’Neill, CEO of AHIP. “We anticipate this more focused strategy will help effectively value our business in the public markets.”
With a portfolio of 67 hotels in larger secondary markets in the U.S., AHIP is focused on growth in those markets where the company is currently affiliated with major brands such as Marriott, Hilton and IHG.
Net proceeds from the sale is approximately $90 million after the repayment of property mortgages and transaction closing costs. The proceeds will be redeployed to acquire additional premium-branded hotels that coincide with AHIP’s long-term strategy.
“Going forward, we intend to concentrate on accretive growth within the upper-midscale to upper-upscale categories of hotels in secondary metropolitan U.S. cities,” says O’Neill. “We have already begun our review of potential hotel-acquisition opportunities we believe could be highly complementary to our existing premium-branded portfolio.”